What Is Wealth in America?

A few readers pointed me to a Bloomberg article entitled and wanted to know my thoughts.

Before I dig in, I want to point out that the author of this article, Suzanne Woolley, did a good job of reporting on the results of the survey in question. My issue is with the results of the survey, not the survey itself or how Woolley summarized it.

Let’s back up for just a second. This Bloomberg article provides a summary of the , a study done by Charles Schwab in which the company surveyed a thousand Americans on their financial state and financial goals.

Schwab’s summary of the survey results is pretty on par with what I’d expect:

New research from Charles Schwab shows that three in five Americans live paycheck to paycheck and that only one in four have a written financial plan, but those who do exhibit positive investing and saving behavior.

It’s when you start digging into the details that some revelatory things appear. Here are seven big things I noticed when looking at this information that are helpful for me (and probably for you) in terms of looking at personal finances.

#1: How Much Do You Need to Be Wealthy?

The Bloomberg piece offers up this interesting look into what people define as “wealthy”:

To be financially comfortable in America today requires an average of $1.4 million, up from $1.2 million a year ago, according to the survey. The net worth needed to be “wealthy”? That’s an average $2.4 million.

It’s really important here to look at this as an “average.”

Let’s say that you have five recipients. One of them says that you need $4 million to be comfortable and the other four say $600,000. The average? $1.4 million, just like the survey.

There’s also the issue that the amount varies a lot from area to area across the United States. $1.4 million in San Francisco just doesn’t go as far as $1.4 million here in northern Iowa.

The third issue that springs to mind here is that different people have very, very different views of what is needed to be “wealthy,” beyond merely what the cost of living is in their area. For me personally, being “wealthy” merely means that there’s no short-term situation that can really derail your life. Your car fails? You can replace it without derailing your life. You lose your job? No major crisis, not for years. Your house burns to the ground? You can quickly rent an apartment.

To me, that’s “wealthy,” at least in a financial sense, and the dollar amount needed to get there is pretty small. I would define us as definitely “wealthy” within that constraint.

Others define “wealthy” much differently (in the financial sense) and it usually involves some material trappings or access to high-end experiences (like world travel on a consistent basis). It’s my belief that there are people in very bad financial shape that couldn’t afford much of a negative turn who enjoy the kinds of trappings people associate with “wealthy,” but I don’t consider them wealthy.

What do you consider “wealthy”? It’s worth remembering that, when you read media articles describing someone as “wealthy,” it might not remotely match what you’re thinking of.

#2: What Is Wealth?

Another quote from the Bloomberg summary:

While 18 percent defined wealth as being able to afford anything they desired, 17 percent said it was “loving relationships with family and friends.”

It goes on:

When asked about what made respondents feel “wealthy” in their daily lives, the survey found that spending time with family was most commonly cited, at 62 percent overall. That was followed by what can be the most elusive of things, cited at about the same level across generations: “taking time for myself,” which came in at 55 percent.

This is a part of the article I really enjoyed, because it centered wealth in terms of other aspects of life besides money.

Wealth isn’t just expressed in dollars and cents. It’s expressed in the number of great relationships you have. It’s expressed in the number of meaningful quality experiences you have.

For me, it’s expressed in the frequency in which you can slip into a flow state, where you’re able to be so engrossed in something that you lose track of time and place. To me, a wealthy life is one where that happens quite frequently.

Wealth does not just mean money. In fact, I often view money as merely a tool to help build this kind of wealth, but this kind of wealth actually doesn’t require a whole lot of money to build. It just requires commitment and a willingness to use one’s spare time in a meaningful way rather than just letting time pass on unimportant things.

Use your spare time to build relationships and build understanding and build knowledge and experience meaningful things. That’s a powerful way to build personal wealth in a way that isn’t expressed in one’s net worth. Don’t just let your time and energy and focus idle by.

#3 – What Is ‘Luxury’? A Good Daily Life

Another quote from the Bloomberg article:

Life’s little luxuries matter, too—but they are called “luxuries” for a reason. Having meals out or food delivered made 41 percent of people feel “wealthy” in their daily lives. Even services such as Netflix, Spotify or Amazon Prime made life feel richer for an overall 33 percent—particularly for millennials, at 44 percent, compared with 29 percent and 23 percent for Generation X and baby boomers, respectively. Write-in comments for what made people feel “wealthy” included “access to healthcare,” “being able to help close friends and family financially” and “just waking up in the morning.” Only one of those doesn’t require money—sort of.

If you dig into the survey data, the top seven items that people listed when it comes to a rich daily life were spending time with family (62% of respondents), taking time for myself (55% of respondents), owning a home (49% of respondents), meals out or delivered (41% of respondents), subscription services like Netflix (33% of respondents), grooming and pampering (29% of respondents), and having the latest tech gadgets (27% of respondents). All other items were below 25%, including having a busy social life and a bunch of specific examples of spending.

It’s worth noting that the top two responses have very little to do with money at all, while the next five are all “treats” that people buy for themselves that require some degree of financial commitment.

It has been my experience that when you buy a “treat” for yourself, the happiness and pleasure that you derive from the actual treat is fleeting. On rare occasion, it will form a lasting happy memory, but that happy memory often has more to do with other people or for a minor aspect of the “treat” than the treat itself. This becomes particularly true when a “treat” becomes a daily thing and goes from being something special to being an ordinary daily routine.

In other words, I’m truly glad that “spending time with family” and “taking time for myself” were the top choices here when describing a rich daily life. A rich daily life, in my opinion, centers around things from which happiness bubbles up from naturally – relationships, meaningful experiences, using your skills and talents – rather than efforts to simply buy your way straight to fleeting happiness by buying “perks.”

A great example: investing the time to build the skills needed to cook at home provides a foundation for happiness to bubble up regularly. It might be really frustrating at times to get there, but when you do, you don’t have to “buy” the joy of a good meal any more.

You can’t buy lasting happiness. Instead, you find it while doing other things. You can buy luxuries, but those provide fleeting happiness.

#4: Needing a Written Financial Plan

From the Bloomberg summary article:

In line with many other surveys put out by financial services firms, the Schwab survey stresses how people who have a written financial plan feel more stable and are more on top of their daily finances. Some 52 percent of boomers, however, said they didn’t have a plan because they didn’t have enough money to need a plan. People that chose “other” to explain why they lacked a financial plan wrote in responses such as “I have trust issues with financial people, especially after the 2008 crisis” and “all my information has been compromised by criminals.” Not a lot of “peace of mind” there.

If you want to achieve financial success, one of the most important things you can do is come up with a financial plan, write it down, review and revise it, finalize it, and stick to it. It doesn’t matter whether you have almost no assets or you’re a millionaire – without a clear plan for how you’re going to move forward and improve your financial state, you’re probably not going to improve your financial state.

It does need to be said that a plan alone doesn’t fix everything. It’s a given that the plan needs to be solid and it also needs to be realistic, but it also hinges on a person’s willingness (and ability) to follow through with the plan they’ve made.

The reality is that a well-considered plan that you actually wrote down in detail is a plan that you’re far more likely to follow through with than a vague idea of how you’re going to succeed that floats in your head.

It’s the same reason why, although I don’t believe goals are the be-all-end-all of how to improve yourself, I strongly advocate for writing down your goals and creating detailed plans for achieving them.

What’s that reason? It’s all about translating a big vision into everyday action and routine and habit. It is really hard to do that when a big goal is just an idea floating in your head. When you crystallize it, make it clear, come up with a plan, write it down, revise it, and attempt to make the steps toward that goal present in your everyday life, you will vastly increase your chances of success.

#5: Youth Engagement in Finances

From the Schwab survey results summary:

According to the Modern Wealth Index, millennials are in many cases more focused on saving, investing and financial planning than older generations:

* 31% have a written financial plan compared to 20 percent of Gen X and 22 percent of Boomers
* 36% have specific savings goals compared to 25 percent of Gen X and 17 percent of Boomer
* Nearly three-quarters regularly rebalance their investment portfolios compared to 66 percent of Gen X and 64 percent of Boomers
* Millennials are almost as likely as Boomers to work with a financial advisor (22% and 25%, respectively) while Gen X lags (16%)
* 64% of millennials believe they will become wealthy in their lifetime

I don’t really buy into the whole “generational” thing, as I generally think cohorts by decade are more useful. However, in terms of looking at general trends, it’s a useful way to get a thumbnail of young adults (“millennials”), middle aged folks (“Generation X”), and people at or near retirement age (“Boomers”).

My experience has been that younger people today walk into their early adult lives with far more burdens on their shoulders than previous generations did. They’re often saddled with student loans that add up to more than their initial salary. Many of them don’t have a college degree to get ahead and score a great job, but merely to compete for a halfway decent job.

That forces people into planning ahead and considering their future more than it would for people who walk into the job market and adult life without those burdens, as most people did forty or fifty years ago.

I was on the cusp of that change, entering the job market in 2002. I was lucky enough to have only moderate student loans (still in the five figures, but not nearly as high as they could have been thanks to scholarships), but I certainly witnessed friends having far higher loan totals than me and I witnessed that a college degree doesn’t mean an automatic ticket to a great job.

Because of those factors, I was forced into financial responsibility pretty quickly. I think that the experience is similar for a lot of millennials, simply because the burden is so high.

#6: The Key to Wealth?

From the Bloomberg summary article:

The survey found that the American Dream is not dead, at least the one that dictates that making money is indeed the path to bliss. Some 49 percent of respondents said that saving and investing is “the key to wealth,” with another 40 percent choosing “hard work.” Eleven percent, however, cited luck.

Investing is the key to wealth only if you have enough income to be able to invest. You get to that point via hard work, frugality, and… luck.

Like it or not, luck plays a pretty big role in things. The circumstances of your birth play a large role in how successful you’re able to become, particularly if you’re a person of average or somewhat above average talent. Truly exceptional people will almost always rise up, but those people are pretty rare. It’s the somewhat talented that really benefit from luck and good circumstances.

That being said, there are many things you can do to create your own luck. Build lots of relationships, and be helpful in those relationships. Make yourself go to situations where you might build relationships and meet people who can help your career (and maybe you can help them, too). Spend your spare time sharpening your skills instead of staring at Netflix. Don’t be afraid to speak up, and when there are opportunities to present or speak publicly, jump on board with them.

Those things make it much easier to find opportunities and take advantage of them when they present themselves. Yes, luck occurs, but you can create fertile soil in your life for luck to take root and turn into great fortune.

#7: Don’t Let Media or Surveys Tell Your Story

It is really easy when reading survey results like these to try to make your life match up to the patterns described in the article. It’s natural – that’s what humans do. We are very very skilled at pattern matching and we do it all the time, even when it’s not really warranted.

The truth is that big broad patterns like these don’t really fit the realities of your life. This is true for everyone – a big composite picture might look somewhat like you, but it doesn’t look anywhere near exactly like you.

Don’t define what matters in your life by what matters in the lives of others. Figure out what matters in your own life.

Don’t define financial success by how others define it. Set goals that are meaningful for you and work to achieve those goals, not the goals others have for themselves.

Don’t define “luxury” by what other people are saying that they want. Rather, define “luxury” by the moments in your life that bring you true lasting joy and pleasure, whatever they might be.

You can’t buy happiness, so don’t try. Rather, figure out what things in your life genuinely bring forth happiness on their own and strive to build those things.

Information like this is useful for seeing a snapshot of society as a whole, but that shouldn’t be a substitute for looking at your own life. You aren’t that snapshot.

So, why do we even want to look at such snapshots? The reason is simple – we can learn useful things for ourselves from them.

We don’t necessarily want to adopt the goals we read about, but we certainly might want to steal some of their tactics and use them toward our own goals.

We don’t necessarily want to do every single thing on a long list of frugal tactics, but we might see two or three that are really useful for us.

It can provide us an opportunity to step back and look at the hurdles that other people are leaping over in their life, and we can see what similar hurdles are in our own life and think about how we can leap our own hurdles.

Learn from other people. Take the useful things they do and apply them to where you want to go.

Don’t let the media tell your story for you. Rather, define your own story and use the media to steal tactics to help you finish that story with a happy ending.

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